US vs International Stocks

The US-to-international ratio divides the total return of US equities by the total return of developed international (ex-US) stocks — the markets of Europe, Japan, Australia, and other advanced economies outside the US and Canada. It captures the home-versus-abroad decision every globally minded investor faces: has tilting toward US stocks beaten holding the rest of the developed world? Because the line is rebased to 100 at the start of the common history, it measures relative performance, not a price. A rising ratio means US stocks are outperforming; a falling ratio means developed international markets are leading.

Both legs are baskets of established, large-cap companies in mature economies, so this is a comparison of like with like in a way the cross-asset charts are not. What differs is sector composition, valuation, currency exposure, and policy. The US index is heavy in technology and growth; the international index leans more toward financials, industrials, and dividend-rich value sectors. The ratio is therefore as much a read on US-style growth leadership versus international value as it is on geography.

A rising line means US equities are pulling ahead of their developed peers — the dominant pattern of the past decade or so, powered by US technology, growth-sector leadership, and a strong dollar. A falling line means international developed markets are winning, which has tended to happen when value and cyclical sectors lead, when the dollar weakens, or when US valuations are unwound from extremes. These leadership runs are long: one region can dominate for the better part of a decade before the baton passes.

Both legs use total return with dividends reinvested, which matters here because international developed markets have historically paid higher dividend yields than the US. A price-only chart would understate international returns by stripping out that larger income stream, making the comparison unfair. Using total return on both sides keeps the head-to-head honest, especially over the long horizons where reinvested dividends compound into a meaningful share of the difference.

Currency is the first and most distinctive driver. The international leg is measured in US-dollar terms, so a strengthening dollar drags on international returns even when local markets do well, while a weakening dollar flatters them. A long dollar bull market is therefore a powerful tailwind for the US side of this ratio, independent of underlying company performance, and a dollar reversal has historically been one of the clearest catalysts for international catch-up.

Sector composition and the growth-versus-value cycle are the other major forces. The US market's heavy weighting in high-growth technology means it tends to lead when rates are low and growth is scarce and prized; the more value- and cyclical-heavy international indexes tend to lead when rates rise, inflation runs warmer, and cheap, economically sensitive sectors come back into favor. Relative valuation matters too — when US stocks trade at a large premium to international peers, the starting point makes future US outperformance harder, even if it can persist far longer than valuation alone would suggest.

The chart moves in long regional regimes. The late 1980s saw Japan's bubble lift international markets dramatically before its collapse. Through parts of the 2000s, a weakening dollar and a global commodity-driven boom favored international and the ratio fell, with developed markets outpacing a US market still digesting the dot-com bust. The 2008 crisis hit markets globally, but the recovery diverged sharply.

From roughly the early 2010s onward, US equities entered a long stretch of dominance, driven by the technology sector, strong earnings, and a firm dollar, sending the ratio to multi-decade highs in favor of the US. That run has been so durable that international diversification has at times looked unrewarding to US-based investors. History counsels caution about extrapolating: prior eras of extreme US leadership have eventually given way to multi-year periods of international catch-up, often coinciding with a turn in the dollar.

Each month the chart divides the total-return index for US equities by the total-return index for developed ex-US equities, both expressed in US dollars, then rebases the result to 100 at the first month both have data. The US leg is a broad large-cap index with dividends reinvested. The international leg is a broad developed-markets-ex-US index, also total return, converted to dollars so that a US-based investor's currency experience is built into the comparison.

Two caveats are worth noting. First, currency is baked in: because the international leg is in dollar terms, swings in the exchange rate move the ratio independently of local-market performance, so a falling line can reflect a weaker dollar as much as stronger foreign stocks. Second, the line is a ratio of two indices, not a tradable spread — fund fees, withholding taxes on foreign dividends, and other frictions are excluded, and because it is rebased to 100 the absolute level matters only against its own history. MacroRadar sources both legs from public providers and updates monthly.

This ratio is the developed-world geographic split, and it pairs directly with emerging vs developed markets, which extends the map to the faster-growing, higher-risk economies and shares the developed-international index as its benchmark. Read together, the two charts show whether capital is favoring the US, the rest of the developed world, or the emerging frontier — and the dollar tends to be the common thread linking them.

Because so much of US outperformance has been a growth-sector story, the growth-vs-value chart rhymes closely with this one: US leadership and growth leadership have largely been the same trade. The technology-sector-vs-S&P-500 chart isolates the single engine that has driven much of the US edge. And for the broader question of how US equities stack up against other asset classes entirely, the stocks vs gold and stocks vs bonds charts complete the picture.

The macro-regime panel above frames the reading, because regional leadership is tightly linked to the dollar, the rate environment, and the growth-versus-value cycle. A high, stretched ratio during a strong-dollar, low-rate, growth-led regime says US dominance is firmly in force — historically a comfortable backdrop for US-tilted portfolios, but also the kind of valuation and currency extreme from which international catch-ups have eventually started.

A falling ratio alongside a weakening dollar or a rotation toward value and cyclicals tends to confirm an international revival. Neither pattern is a forecast. The overlay is meant to show whether the relative-performance picture is consistent with the prevailing currency and style regime or diverging from it — and because these turns hinge so much on the dollar, the regime context is especially important for reading this particular chart.

Global diversification is a core principle of long-term investing, yet the reward for it has varied enormously by era. This ratio shows that home-country tilts can pay off handsomely for a decade and then reverse, and that the choice between concentrating in the US and spreading across developed markets is really a joint bet on the dollar, on valuations, and on whether growth or value sectors will lead. A ratio stretched to historic highs in the US's favor has, in the past, often preceded stretches of international catch-up.

It is not a timing signal. The value is in pairing the long-run relative-performance picture with the current macro regime shown above to judge whether today's environment has historically favored US or international leadership. Treat it as one input into a globally diversified, long-horizon plan rather than a reason to abandon one region for another. MacroRadar presents this as a historical indicator, not investment advice.